Debt Consolidation Companies May Thrive As Savings Rate Falls |

The latest numbers from the U.S. Department of Commerce say that consumers are slowly starting to increase their spending again, which could mean a rise in the need for debt consolidation services. That’s because the same Department of Commerce numbers highlight a disturbing trend: Not only is consumer spending on the upswing, it’s rising faster than are income levels across the country. This makes for the perfect recipe for an increase in consumer debt. And when debt levels are on the rise, it often means big business for debt consolidation companies.

The Numbers

According to the U.S. Department of Commerce numbers released in early March, consumer spending is up 5 percent. That’s good news for retailers. Some economists also view it as a positive sign: Spending rises when consumers begin regaining confidence in the economy. According to Stephen Gandel of Time Magazine, this is important to the future health of our economy. He points to the somewhat surprising fact that a total of 70 percent of the U.S. economy is fueled by consumer spending. But Gandel on his financial blog also expresses some concerns: Spending may be up 5 percent, but people’s income levels are only rising by 1 percent. As consumers spend more, and as income doesn’t nearly match this rate, the country’s savings rate is falling. And that, Gandel argues, is a recipe for future trouble.

Sluggish Savings Rate

The Commerce Department numbers indicate that the U.S. savings rate has fallen to 3.3 percent. That’s the lowest this figure has been since October of 2008. Gandel says that the great recession from which the country is recovering should have taught U.S. consumers one thing: Having a large amount of debt is a bad thing. It’s the surest way to economic ruin, especially when consumers can no longer count on their employers to keep them on the payroll.

Debt Consolidation Growth?

As consumers spend more and save less, will the debt consolidation industry see a big boom in business? The odds are high that it will. After all, consumers can only keep spending more than they earn before their spiraling amounts of debt begin dragging them down financially. When that happens, many consumers will turn to debt consolidation loans. These loans can act as an important financial safety net for struggling consumers. But they can also serve as a financial trap with their high interest rates and origination fees. Let’s hope that the great recession did teach us one thing: Before making any financial decision, it’s important to do the research to make sure it makes sense. That includes the decision to take out a debt consolidation loan.